Diversified location of Indian workers overseas will balance out falling remittances from Gulf: Moody’s

Falling remittances from the Gulf is likely to dampen benefits of lower oil prices in the Asia Pacific region says Moody. However for India, the Philippines and Vietnam, diversified locations and vocations of overseas migrants could help to reduce the fall in worker remittances.Debjoy Sengupta | April 13, 2016, 09:58 IST

Kolkata:Falling remittances from the Gulf is likely to dampen benefits of lower oil prices in the Asia Pacific region says Moody. However for India, the Philippines and Vietnam, diversified locations and vocations of overseas migrants could help to reduce the fall in worker remittances.

US is the source of 57.0% of Vietnam's remittances. For the Philippines, between 2010-13, growth in the number of Filipinos migrating to the US has been far outpaced by those to the Middle East. But the proportion of remittance inflows from the US and GCC are nearly equal, at 34.0% and 31.7% respectively. For these two countries, growth in inflows from the US could offset slower remittances from the Gulf, if the US recovery gathers steam. India may also see some benefit, as 15.9% of its remittance inflows come from the US.

Another factor is the occupational profile of overseas workers. For both India and the Philippines, the relatively diverse occupations of their workers should provide a buffer against an oil-related slowdown in remittances.

A 25% drop in oil prices since the start of 2015 is large, and we expect that future declines in remittances will be much lower than that in percentage terms. So, unless remittances decrease significantly more in percentage terms than we anticipate, their decline will dampen, but not completely offset, the benefits of lower oil prices on the current account. We estimate that it would take a 10% to 30% fall in remittances to outweigh a 50% drop in net oil imports for most countries. Given its larger net oil import bill, India is an exception, and can thus withstand a much greater fall in remittances.

In sovereigns that are already facing external pressures, or where growth is weakening or anaemic, a slowdown in remittances will exacerbate such pressures. Sri Lanka stands out in this regard, with Bangladesh and Pakistan following. India and the Philippines are among the top five remittance recipients globally in dollar terms, but are more resilient to the slowdown because of other buffers, both domestic and external said Moody’s in a recent report.